GUESTWORK | Jim Broadway
The ancient Greek philosopher Socrates despised democracy, considering it weak and inherently corrupt, a governance form driven by the will of the many when, in his view, only an elite few are wise and competent enough to lead.
Today he might say Illinois’ pension system fiasco proves his point.
As the fall veto session nears, debate mounts on SB 512 to address the $86 billion-problem of unfunded pension liability by making public employees pay more into their systems – or get fewer benefits as retirees.
Here is the harsh reality: Educators, who have played by the rules and never missed a Teachers Retirement System payment, will see the generally reasonable terms of their current pension program diminished.
Meanwhile, state support for children in the classroom – especially those most at-risk – as well as for human services, mental health, public health, for seniors and veterans, natural resources and environmental protection and everything else, will be crippled for decades as payments for past pension underfunding drain the state treasury.
All this is a consequence of decisions made annually over many years by pandering policymakers, legislators and governors of both political parties, who turned pension liability into a ravenous, budget-devouring beast. How did the beast grow? The $86 billion in unfunded pension liability represents about $6,660 per Illinois citizen. It is nearly triple the entire annual state General Revenue Fund budget. It is a monster.
There are several specific policy decisions that fed the beast. Every year legislators pass, and governors approve, budget bills in which state funding for pension payments is deliberately short. This has been going on since 1953.
What is the accumulated shortfall?
According to TRS board member Bob Lyons, the state has saved $14.8 billion by not paying what the actuaries calculated the pension systems should have received. But $14.8 billion is a fraction of the $45 billion in TRS liabilities not currently matched by assets. What caused the other $30 billion in damage?
Largely, it is in lost returns on funds TRS would have invested if the state had paid its statutory share. For example, $300 million not paid in 1981 would dig about a $1.8 billion hole by now, based on lost earnings of just 5.5 percent compounded annually. The state’s consistent diversion of statutorily required pension contributions – so the dollars could be spent on things of higher political value to legislators and governors – is the primary cause of the current fiasco. Throw the bums out? It’s too late. Most of the bums long ago retired. Many have expired. Hundreds of legislators consciously voted to short the pensions over the years. Today’s crop is just fol lowing tradition.
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